Apple Qualcomm war continues, Qualcomm may be accused of patent fraud

In the past month, China and Germany have decided on patent disputes between Qualcomm and Apple. In early December 2018, the Intermediate People's Court of Fuzhou City, China issued a ban on the sale of seven Apple iPhone products; on December 20, 2018, the Munich District Court in Germany also issued an ban, arguing that Apple infringed Qualcomm's patent rights in smart phone energy-saving technologies. At present, Apple has completely suspended the sale of the four mobile phones involved in the case in Germany, and has also removed the products involved on Apple's official website in Germany, and recalled the products involved from third-party distributors.

Judging from the current judgments in China and Germany, Qualcomm seems to have the upper hand in this patent dispute between Qualcomm and Apple. There is no doubt that the verdict of the two countries has brought some obstacles to Apple's global business development, whether it is the pressure on Apple's sales due to the ban on German products, or the pressure on public opinion caused by China's refusal to implement it, as well as the subsequent possible legal consequences. Although Qualcomm CEO Steve Mollenkov has expressed his willingness to settle on multiple public occasions, Apple has not yet accepted Qualcomm's olive branch.

However, in the United States, home of Apple and Qualcomm, Qualcomm has recently encountered some troubles. In early 2019, the U.S. Federal Trade Commission (FTC) v. Qualcomm Monopoly entered the stage of court debate. The anti-monopoly brought up by the FTC this time is mainly aimed at the already notorious "Qualcomm Tax". Qualcomm charges Apple and other mobile phone manufacturers a certain percentage of the total price of the mobile phone in exchange for the right to use its technology. Faced with Qualcomm's obviously unfair charging method, many mobile phone manufacturers are also dumb to eat Coptis chinensis, because Qualcomm threatens not to pay the royalties, it would cut off the supply of the vital wireless chips in mobile phones. The FTC's lawsuit against Qualcomm is that Qualcomm has many patents on wireless technology, and it is the royalties paid by mobile phone manufacturers that indirectly drive the price of smartphones.

Apple executives said that Apple had considered using Intel-made chips in the iPad Mini 2 to solve the dilemma of relying entirely on Qualcomm on modem chips, but Qualcomm made concessions and Qualcomm offered rebates to Apple to reduce its costs, so Intel did not become a chip supplier for the iPad Mini 2. This is also the FTC's view that Qualcomm forced Apple to reach an anti-competitive agreement in exchange for the purchase of Qualcomm chips, weakening Intel's competitiveness in the field. The Apple executive also added that if Qualcomm's terms are not accepted, the default contract patent license fee will reach $17-18 per device, which will greatly exceed the current Qualcomm license fee of $7.5. Therefore, Apple has little choice in the choice of chips, and may not even get the chip in the end. Apple believes that when using Qualcomm chips, it should only pay royalties for the value of Qualcomm's connected chips, not the entire device, and that Qualcomm's charging model is actually taxing Apple's innovation, and Apple should not pay for technological breakthroughs that have nothing to do with Qualcomm.

In addition to Apple, the testimony provided by Chinese companies Huawei and Lenovo has also attracted attention. Huawei's senior legal adviser testified in court that Qualcomm had threatened Huawei to stop supplying chips to Huawei if it did not sign a licensing agreement with Qualcomm, which contained an unequal "Qualcomm tax" and required Huawei to pay a patent licensing fee on the basis of the purchase of chips. However, if Huawei does not sign the agreement and buys chips from other chip manufacturers, Huawei will have to pay a higher "loyalty tax" to obtain Qualcomm's patent license on technologies such as CDMA.

The testimony provided by Lenovo's vice president of intellectual property is that Qualcomm has retaliated against customers who tried to challenge its legal terms in the past, including delaying or even cutting off the supply of chips. Although it is not known whether Qualcomm will really fulfill the threat of interrupting the supply, Lenovo obviously did not dare to take this risk and finally signed an agreement with Qualcomm.

In addition to Apple Huawei and other mobile phone manufacturers, Qualcomm's competitors MediaTek and Intel have also testified in court in an attempt to convince the court that Qualcomm does have a monopoly in market competition.

Qualcomm, on the other hand, argues that Qualcomm's licensing practices follow long-established industry norms, and that it charges the same licensing fees as it did many years before it started selling chips, and indeed, before Qualcomm, companies such as Ericsson, Huawei, Nokia and Samsung also charged licensing fees based on the entire device, which seems to be the norm in the mobile phone industry. However, even if it was common in the industry before, it cannot be considered that such behavior is correct, and this cannot be the reason for collecting a "high tax.

Qualcomm also provided evidence that 54% of the modem chips in Huawei's equipment, Samsung and Huawei, the world's two largest smartphone manufacturers, come from Huawei's own internal supply, while only 22% of the modems come from Qualcomm. 52% of the modem chips used by Samsung are produced by Samsung itself and 38% by Qualcomm. Therefore, Qualcomm is not out of a complete monopoly position in the entire modem market. However, the FTC's investigation is not aimed at the entire modem chip market, but mainly at the high-speed "high-end chip" market, in this area, Qualcomm seems to be the only choice.

In addition to the U.S. market, Qualcomm's business has also been investigated by regulators to varying degrees in South Korea, China and Europe. In January 2018, the European Union announced a fine of 0.997 billion euros on Qualcomm, mainly for Qualcomm's abuse of its market dominance. Position, in exchange for Apple's exclusive use of Qualcomm chips in its smartphones and tablets in the form of rebates to Apple.

According to the current form, Qualcomm is in a very disadvantageous position. Evidence from many mobile phone manufacturers and Qualcomm's chip competitors shows that Qualcomm does have unfair licensing. At present, the case has not yet been pronounced. If Qualcomm loses the case, it is likely to be forced to change the mode of charging mobile phone manufacturers, and a number of patent lawsuits and settlements between Qualcomm and Apple may also be affected by this.